Rubicon Tech Drops 6%: Q4 Rev Light, Q1 Rev View Light

By Tiernan Ray

Shares of Rubicon Technology (RBCN), which makes sapphire substrates that are used in production of light-emitting diode products, and other devices, are down 72 cents, or almost 7%, at $10.08, after the company this afternoon reportedQ4 revenue just shy of analysts’ estimates, and a net loss in line with consensus, and forecast this quarter’s revenue also just shy of consensus.

Revenue in the three months ended in December fell to $11.5 million, yielding a net loss of 22 cents.

Analysts had been modeling $11.7 million and a 22-cent loss per share.

The company said sales of sapphire is in general on the rebound, driven by applications such as Apple‘s (AAPL) iPhone 5S home button:

Overall demand for sapphire continued its rebound with the growing momentum of the general lighting segment of the LED market and demand from non-LED applications for mobile devices, such as the sapphire home button on the iPhone 5S, as well as the camera lens cover now being adopted by more smartphone manufacturers.

CEO Raja Parvez remarked that the company had made progress on product categories such as “patterned sapphire wafers” during the quarter:

While wafer revenue was low in the fourth quarter, we continued to make good progress on our patterned sapphire substrate (“PSS”) and polished wafer initiatives. We are very pleased with the progress on the PSS product introduction. We announced the introduction of the PSS product in October and we have already received requests for samples from sixteen different customers, which we believe positions us to meet our 2014 revenue target for PSS wafers of at least $15 million. In addition, we received our first production order of four-inch polished wafers for the first quarter and expect orders from existing customers of six inch LED wafers to begin picking up in the second quarter.

CFO William Weissman said the company’s low utilization of its plants continued to weigh on gross profit margin, but that there had been improvement in margin during the quarter. He said the “re-starting of our crystal growth furnaces” would help lower “idle plant costs” this year and boost margins further.

Still, he said the company’s continued losses meant Rubicon will maintain a valuation allowance:

Due to the loss in the fourth quarter of 2013, we are in a cumulative loss position for the past three years which is considered by the accounting standards to be significant negative evidence which is very difficult to overcome. While our financial outlook for the company remains positive, under the accounting standards objective negative evidence is given greater weight than other subjective positive evidence such as our projections for future growth. Consequently, this has led us to establish a valuation allowance in the current quarter. We will maintain the tax valuation allowance and no longer accrue tax benefits or tax expense on our income statement until an appropriate level of profitability is attained.

For the current quarter, the company sees revenue at around $13 million, below the average $13.8 million estimate.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.